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Minutes of the Federal Open Market Committee

June 14–15, 2022

A joint meeting of the Federal Open Market Committee Lorie K. Logan, Manager, System Open Market
and the Board of Governors of the Federal Reserve Sys- Account
tem was held in the offices of the Board of Governors
on Tuesday, June 14, 2022, at 11:00 a.m. and continued Patricia Zobel, Deputy Manager, System Open Market
on Wednesday, June 15, 2022, at 9:00 a.m.1 Account

Attendance Ann E. Misback, Secretary, Office of the Secretary,

Jerome H. Powell, Chair Board
John C. Williams, Vice Chair
Michelle W. Bowman Matthew J. Eichner,2 Director, Division of Reserve
Lael Brainard Bank Operations and Payment Systems, Board;
James Bullard Michael S. Gibson, Director, Division of
Lisa D. Cook Supervision and Regulation, Board; Andreas
Esther L. George Lehnert, Director, Division of Financial Stability,
Philip N. Jefferson Board
Loretta J. Mester
Christopher J. Waller Daniel M. Covitz, Deputy Director, Division of
Research and Statistics, Board; Sally Davies,
Meredith Black, Charles L. Evans, Patrick Harker, Deputy Director, Division of International
Naureen Hassan, and Neel Kashkari, Alternate Finance, Board; Rochelle M. Edge, Deputy
Members of the Committee Director, Division of Monetary Affairs, Board;
Michael T. Kiley, Deputy Director, Division of
Thomas I. Barkin, Raphael W. Bostic, and Mary C. Financial Stability, Board
Daly, Presidents of the Federal Reserve Banks of
Richmond, Atlanta, and San Francisco, respectively Jon Faust and Joshua Gallin, Senior Special Advisers to
the Chair, Division of Board Members, Board
Kenneth C. Montgomery, Interim President of the
Federal Reserve Bank of Boston Burcu Duygan-Bump, Jane E. Ihrig, Kurt F. Lewis,
Nitish R. Sinha, and Paul R. Wood, Special
James A. Clouse, Secretary Advisers to the Board, Division of Board
Matthew M. Luecke, Deputy Secretary Members, Board
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary Linda Robertson, Assistant to the Board, Division of
Mark E. Van Der Weide, General Counsel Board Members, Board
Trevor A. Reeve, Economist
Stacey Tevlin, Economist Marnie Gillis DeBoer3 and David López-Salido, Senior
Beth Anne Wilson, Economist Associate Directors, Division of Monetary Affairs,
Board; Diana Hancock and John J. Stevens, Senior
Shaghil Ahmed, Brian M. Doyle, Carlos Garriga, Associate Directors, Division of Research and
Joseph W. Gruber, Ellis W. Tallman, and William Statistics, Board
Wascher, Associate Economists

1 The Federal Open Market Committee is referenced as the 2 Attended through the discussion of developments in finan-
“FOMC” and the “Committee” in these minutes; the Board cial markets and open market operations.
of Governors of the Federal Reserve System is referenced as 3 Attended Tuesday’s session only.

the “Board” in these minutes.

Page 2 Federal Open Market Committee
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Edward Nelson and Robert J. Tetlow,4 Senior Advisers, James P. Bergin, Marc Giannoni, Giovanni Olivei,
Division of Monetary Affairs, Board Paolo A. Pesenti, and Robert G. Valletta, Senior
Vice Presidents, Federal Reserve Banks of New
Christopher J. Gust, Associate Director, Division of York, Dallas, Boston, New York, and San
Monetary Affairs, Board Francisco, respectively

Shane M. Sherlund, Deputy Associate Director, Roc Armenter, Vice President, Federal Reserve Bank of
Division of Research and Statistics, Board Philadelphia

Giovanni Favara and Etienne Gagnon,3 Assistant Alisdair G. McKay, Senior Research Economist,
Directors, Division of Monetary Affairs, Board; Federal Reserve Bank of Minneapolis
Paul Lengermann and Byron Lutz, Assistant
Directors, Division of Research and Statistics, Developments in Financial Markets and Open
Board Market Operations
The manager of the System Open Market Account
Penelope A. Beattie,3 Section Chief, Office of the (SOMA) turned first to a discussion of financial devel-
Secretary, Board; Valerie S. Hinojosa, Section opments. Over the intermeeting period, there were sig-
Chief, Division of Monetary Affairs, Board nificant swings in asset prices, and financial conditions
tightened, on net, as market participants assessed incom-
Alyssa Arute,2 Manager, Division of Reserve Bank ing information about the economy. In the United
Operations and Payment Systems, Board States, near-term policy rate expectations shifted mark-
edly toward the end of the period, particularly after the
Ayelen Banegas and Anna Orlik,3 Principal release of the May consumer price index (CPI) report.
Economists, Division of Monetary Affairs, Board; Ahead of the release of the report, market expectations
Stephen F. Lin, Principal Economist, Division of reflected a broad consensus that there would be 50 basis
Research and Statistics, Board point rate increases at both the June and July FOMC
meetings. After the release of the higher-than-expected
Giovanni Nicolò, Arsenios Skaperdas, and Hiroatsu inflation data, policy-sensitive rates pointed instead to a
Tanaka, Senior Economists, Division of Monetary considerable probability of 75 basis point moves at both
Affairs, Board; Cisil Sarisoy, Senior Economist, the June and July meetings. The market-implied path of
Division of International Finance, Board the federal funds rate moved higher at longer horizons
as well. Market participants noted elevated uncertainty
Achilles Sangster II, Senior Information Manager, about the economic and monetary policy outlook.
Division of Monetary Affairs, Board
Across the yield curve, rates on nominal Treasury secu-
David Na, Senior Financial Institution and Policy rities ended the period significantly higher, primarily re-
Analyst, Division of Monetary Affairs, Board flecting the revision in the outlook for monetary policy
and the associated rise in real yields. Market-based
Jose Acosta, Senior Communications Analyst, Division measures of inflation compensation continued to indi-
of Information Technology, Board cate expectations that inflation would decline notably in
coming quarters, and measures of medium-term infla-
Kathleen O. Paese, First Vice President, Federal tion compensation fell over the intermeeting period.
Reserve Bank of St. Louis Market participants reported that while liquidity condi-
tions in the market for Treasury securities had been af-
David Altig, Kartik B. Athreya, Michelle M. Neal, and fected by the elevated volatility in rates and larger trades
Anna Paulson, Executive Vice Presidents, Federal were having an increased effect on pricing, overall mar-
Reserve Banks of Atlanta, Richmond, New York, ket functioning had held up. Responding to higher in-
and Chicago, respectively

4 Attended from the discussion of the economic and financial

situation through the end of Wednesday’s session.
 Minutes of the Meeting of June 14–15, 2022 Page 3
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terest rates and some concerns about the growth out- under the initial monthly caps on redemptions of
look, equity prices moved substantially lower over the $30 billion for Treasury securities and $17.5 billion for
period. agency debt and agency mortgage-backed securities
(MBS). Under current staff projections, the SOMA
The manager turned next to a discussion of develop-
portfolio was anticipated to decline roughly $400 billion
ments related to foreign central banks. Most major for-
by the end of 2022. As noted in the recent SOMA an-
eign central banks were proceeding on a path of remov-
nual report and reported in the Board’s first-quarter fi-
ing policy accommodation in order to address elevated
nancial statements for the Federal Reserve System, the
levels of inflation. Several—including those of Canada,
SOMA portfolio had an unrealized loss, reflecting the
Australia, and New Zealand—had raised their policy
increase in longer-term interest rates. Unrealized losses
rates 50 basis points over the intermeeting period, and
had no implications for Federal Reserve income and
some signaled the potential need for more forceful tight-
would eventually fall to zero as securities reached ma-
ening in order to address inflation risks. The European
turity. The staff projected that SOMA net income would
Central Bank (ECB) announced an end to its asset pur-
decline and potentially turn negative, with increases in
chase program and signaled an intention to lift policy
the target range lifting the interest expense on some lia-
rates in July. Meanwhile, the stance of monetary policy
bilities, and that this eventuality could result in a deferred
in Japan was generally expected to remain highly accom-
asset entry on the Federal Reserve’s balance sheet. Nei-
modative, though recent upward pressure on Japanese
ther unrealized losses on the Federal Reserve’s existing
government bond yields had led the Bank of Japan
securities portfolio nor negative net income would im-
(BOJ) to step up its efforts to defend its yield curve con-
pair the implementation of monetary policy or the Fed-
trol target. On balance, market participants were fo-
eral Reserve’s ability to achieve its dual-mandate objec-
cused on the largely synchronous shift toward monetary
tives.
policy tightening across most advanced economies.
On other operational matters, the deputy manager noted
Regarding money market developments, the manager
that, over the intermeeting period, the Desk onboarded
noted that the 50 basis point increase in the target range
three depository institutions as new counterparties for
at the May FOMC meeting passed through to the effec-
the standing repo facility (SRF), resulting in a total of
tive federal funds rate and was also transmitted to other
nine depository institutions approved, to date, as SRF
overnight rates. The federal funds rate held steady at
counterparties.
83 basis points throughout the period, while the Secured
Overnight Financing Rate softened, on net, falling to the By unanimous vote, the Committee ratified the Desk’s
bottom of the federal funds target range later in the pe- domestic transactions over the intermeeting period.
riod. Contacts attributed the downward pressure on se- There were no intervention operations in foreign curren-
cured rates to high liquidity levels and declining Treasury cies for the System’s account during the intermeeting pe-
bill supply, as well as elevated uncertainty about the in- riod.
terest rate path, which had increased demand for short-
Staff Review of the Economic Situation
term investments. In this environment, participation in
The information available at the time of the June 14–15
the overnight reverse repurchase agreement (ON RRP)
meeting suggested that U.S. real gross domestic product
facility increased, and a greater share of activity in over-
(GDP) was rebounding to a moderate rate of increase in
night private repurchase agreement (repo) markets was
the second quarter after having declined in the first quar-
conducted by lenders who lacked access to the facility.
ter. The labor market remained very tight, but there
The manager noted that, if ON RRP usage continued to
were some signs that momentum was slowing. Con-
rise, it may be appropriate at some point to consider fur-
ther lifting the per-counterparty limit. Over the longer sumer price inflation—as measured by the 12‑month
percentage change in the price index for personal con-
term, ON RRP usage was expected to fall, with the re-
sumption expenditures (PCE)—remained elevated in
duction in the size of the Federal Reserve’s balance sheet
April, and available information suggested that inflation
resulting in a gradual rise in money market rates relative
was still elevated in May.
to the ON RRP rate.
Total nonfarm payroll employment rose solidly in April
The deputy manager turned next to a discussion of Fed-
and May, though the pace of increase was slower than in
eral Reserve operations and related topics. In accord-
the first quarter, and the unemployment rate remained
ance with the directive to the Open Market Desk, the
unchanged at 3.6 percent. The unemployment rates for
reduction in SOMA securities holdings began in June,
African Americans and for Hispanics were little
Page 4 Federal Open Market Committee
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changed, on net, though both rates remained noticeably declining in the previous two months, following some
higher than the national average. On net, the labor force normalization in categories such as soybeans and phar-
participation rate edged down between March and May, maceuticals, which can exhibit large and idiosyncratic
while the employment-to-population ratio was un- changes. Exports and imports of services continued to
changed. The private-sector job openings rate, as meas- be held back by an incomplete recovery of international
ured by the Job Openings and Labor Turnover Survey, travel. The nominal U.S. international trade deficit wid-
edged lower in April but remained at a high level. Nom- ened to a record size in March and then reversed that
inal wage growth remained elevated, with average hourly widening in April.
earnings having risen 5.2 percent over the 12 months
Incoming data suggested that the global reverberations
ending in May, and the increases were widespread across
from lockdown measures to deal with the spread of the
industries.
COVID-19 virus in China and the Russian invasion of
Consumer price inflation remained elevated. Total PCE Ukraine slowed foreign economic growth. In China, ac-
price inflation was 6.3 percent over the 12 months end- tivity indicators pointed to a sizable restraint on eco-
ing in April, and core PCE price inflation, which ex- nomic activity. The Russian invasion of Ukraine contin-
cludes changes in consumer energy prices and many ued to have an imprint on foreign activity, with persis-
consumer food prices, was 4.9 percent over the same pe- tent stresses in global commodity markets and declining
riod. The trimmed mean measure of 12‑month PCE consumer and business confidence, especially in Europe.
price inflation constructed by the Federal Reserve Bank Inflation abroad moved higher, driven by further in-
of Dallas was 3.8 percent in April, nearly 2 percentage creases in consumer energy and food prices as well as
points higher than its year-earlier rate of increase. In some additional broadening of price pressures to core
May, the 12-month change in the CPI was 8.6 percent, goods and services. Central banks around the world fur-
while core CPI inflation was 6.0 percent over the same ther tightened their monetary policy stances to curb high
period. Measures of inflation expectations derived from inflation.
surveys of professional forecasters and of consumers Staff Review of the Financial Situation
generally suggested that inflation was expected to remain Over the intermeeting period, U.S. Treasury yields and
high in the short run but then fall back toward levels the market-implied federal funds rate path moved sub-
consistent with a longer-run rate of 2 percent. stantially higher on net. Broad domestic equity price in-
Production and spending indicators were mixed but gen- dexes declined considerably, on balance, amid elevated
erally remained strong. Consumer spending and indus- market volatility. In most advanced foreign economies
trial production posted sizable gains in April. However, (AFEs), sovereign yields also increased further, and for-
retail sales declined in May, data on home sales and sin- eign equity price indexes moved lower. Despite further
gle-family housing starts moved down in April, some in- increases in borrowing costs, financing conditions in do-
dicators of manufacturing activity weakened in May, and mestic credit markets remained generally accommoda-
the University of Michigan Surveys of Consumers meas- tive. The credit quality of firms, municipalities, and
ure of consumer sentiment decreased noticeably in the households remained largely stable, although the out-
preliminary June reading. Supply disruptions appeared look for credit quality had begun to deteriorate some-
to have improved in some sectors (such as general mer- what.
chandise retailers) but to have deteriorated in others Since the previous FOMC meeting, 2-, 5-, and 10-year
(such as materials for home construction). On balance, nominal Treasury yields increased considerably on net.
the available indicators suggested that private domestic Early in the intermeeting period, Treasury yields moved
final purchases were increasing at a slower pace in the lower amid rising concerns about a weakening U.S.
second quarter than in the first quarter. And with the growth outlook and Federal Reserve communications
available trade data for April pointing to a rebound in perceived as lowering the chances of large policy rate
exports and a moderation in import growth in the sec- hikes at upcoming meetings. However, yields increased
ond quarter, GDP growth appeared to be rebounding late in the period, with economic data releases largely be-
after having declined in the first quarter. ing interpreted as highlighting the possibility of a more
Regarding trade, real imports of goods stepped back in aggressive tightening of monetary policy. The expected
April from their exceptional strength in March, driven federal funds rate path—implied by a straight read of
by a decline in consumer goods imports. By contrast, overnight index swap quotes—also increased notably on
real goods exports grew in both March and April after balance. Real yields increased more than their nominal
 Minutes of the Meeting of June 14–15, 2022 Page 5
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counterparts, while inflation compensation implied by creased uncertainty about the path of policy rates. Con-
Treasury Inflation-Protected Securities declined. cerns about the global growth outlook weighed on eq-
uity prices, and the broad dollar edged up. Implied eq-
Broad equity price indexes fell sharply over the inter-
uity price volatility remained at elevated levels. Japanese
meeting period on net. The stock price declines were
yields and equity prices, however, ended the period
largely associated with mixed corporate earnings news
about unchanged, as the BOJ reaffirmed its accommo-
early in the period and increasing concerns about the
dative monetary policy stance. Sovereign bond spreads
economic outlook amid global policy tightening. One-
over German bund yields for euro-area peripheral coun-
month option-implied volatility on the S&P 500 index—
tries widened further. These moves were partially re-
the VIX—increased moderately, on balance, remaining
traced following an unscheduled meeting of the ECB on
elevated relative to its historical distribution and signifi-
June 15, at which the ECB indicated that it would take
cantly above average pre-pandemic levels. Spreads on
action to address potential fragmentation risk in euro-
investment-grade and, to a greater extent, speculative-
area sovereign bond markets. Outflows from emerging
grade corporate bonds widened notably, on net, reach-
market-dedicated funds intensified in early May, espe-
ing levels comparable with those at the end of 2018.
cially from local currency bond funds, and credit spreads
This widening of spreads was associated with increased
in emerging market economies widened moderately.
concerns about the outlook for corporate credit amid
monetary policy tightening. Since the previous FOMC In domestic credit markets, financing conditions for
meeting, spreads on municipal bonds narrowed substan- most businesses and households remained generally ac-
tially, on net, moving near levels observed for several commodative over the intermeeting period. Credit re-
years before the pandemic, as investor demand exhibited mained widely available, particularly to higher-rated
some recovery over much of the period from earlier firms and consumers with higher credit scores. Gross
weak levels. nonfinancial corporate bond issuance slowed in May, es-
pecially among speculative-grade issuers, amid elevated
Conditions in short-term funding markets remained sta-
market volatility and high yields. Gross institutional lev-
ble over the intermeeting period, with the May increase
eraged loan issuance decelerated and initial public offer-
in the Federal Reserve’s administered rates passing
ing volumes remained extremely slow in May, while
through promptly to overnight money market rates.
gross issuance of municipal bonds remained robust.
Spreads on longer-tenor commercial paper (CP) and ne-
gotiable certificates of deposit narrowed moderately, Commercial and industrial (C&I) and commercial real
with no signs of spillovers beyond the stablecoin market estate (CRE) loans on banks’ balance sheets expanded at
following the collapse of a large algorithmic stablecoin. a rapid pace in April and May. Issuance of both agency
Indeed, CP outstanding increased slightly over the pe- and non-agency commercial mortgage-backed securities
riod. Money market fund (MMF) net yields across all (CMBS) stepped down slightly in May from its strong
fund types rose notably, as increases in administered pace earlier in the year. Small business loan originations
rates passed through to money market instruments. Se- through April were in line with pre-pandemic levels and
cured overnight rates softened significantly relative to indicated that credit appeared to be available.
the ON RRP offering rate since the May FOMC meet-
Residential mortgage credit remained widely available
ing, with the downward pressure on rates attributed to
through May for most borrowers. While refinance vol-
continuing declines in net Treasury bill issuance, ele-
umes continued trending lower in April and May amid
vated demand for collateral in the form of Treasury se-
higher mortgage rates, outstanding balances of home eq-
curities, and MMFs maintaining very short portfolio ma-
uity lines of credit at commercial banks posted the first
turities amid uncertainty about the pace of anticipated
significant increase in more than a decade, likely reflect-
policy rate increases. Consistent with the downward
ing a substitution by homeowners away from cash-out
pressure on repo rates, daily take-up in the ON RRP fa-
refinances. In consumer credit markets, auto loans out-
cility increased further.
standing grew at a robust pace in the first quarter, con-
Sovereign yields in most AFEs rose over the intermeet- sistent with a rebound in auto sales, but slowed in April
ing period amid investors’ concerns about further infla- and May. Credit card balances at commercial banks rose
tionary pressures and major central banks’ policy com- in April at the fastest pace seen in recent decades, but
munications suggesting a firmer stance of policy. Inter- growth slowed in May.
est rate volatility in AFEs increased, consistent with in-
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Borrowing costs had continued to increase in many sec- remainder of the year. However, monetary policy was
tors since the previous FOMC meeting. Yields on non- assumed to be less accommodative than in the previous
financial corporate bonds remained well above pre- projection, and the recent and prospective tightening of
pandemic levels, and new issuance spreads for institu- financial conditions led the staff to reduce its GDP
tional leveraged loans ticked up in May. Bank interest growth forecast for the second half of 2022 and for
rates for both C&I and CRE loans also increased. 2023. The level of real GDP was still expected to remain
Among small businesses that borrow on a regular basis, well above potential over the projection period, though
the share facing higher borrowing costs rose in both the gap was projected to narrow significantly this year
April and May. Borrowing costs for residential mortgage and to narrow a little further next year. Labor market
loans increased significantly over the intermeeting pe- conditions also were expected to remain very tight, albeit
riod, in line with the increases in MBS and Treasury somewhat less so than in the previous projection.
yields, reaching their highest levels since 2010. In con-
With regard to PCE price inflation, the staff revised up
sumer credit markets, rates on auto loans and new credit
its projection for the second half of 2022 in response to
card offers continued to trend upward.
stronger-than-expected wage growth and the staff’s as-
Despite the historically low volumes of defaults on both sessment that the boost to inflation from supply–
corporate bonds and leveraged loans in April, in the later demand imbalances in the economy, including in food
weeks of the intermeeting period the volume of credit and energy markets, would be more persistent than pre-
rating downgrades of leveraged loans exceeded the vol- viously assumed. All told, total PCE price inflation was
ume of upgrades. In addition, market indicators of fu- expected to be 5.0 percent in 2022, while core inflation
ture default expectations of businesses deteriorated to was expected to be 4.1 percent. PCE price inflation was
some extent, as investors appeared to mark down their then expected to step down to 2.4 percent in 2023 and
assessment of the macroeconomic outlook. to 2.0 percent in 2024, as energy prices were forecast to
decline and as supply–demand imbalances were pro-
Credit quality of business loans on banks’ books re-
jected to diminish because of slowing aggregate demand
mained sound, with C&I and CRE delinquency rates
and an easing of supply constraints. Similarly, core in-
continuing to be low through March. Nonetheless,
flation was projected to slow to 2.6 percent in 2023 and
banks allocated net positive loan loss provisions in the
to 2.2 percent in 2024.
first quarter of this year. This development reversed a
pattern of loan loss reserves being released throughout The staff continued to judge that the risks to the baseline
last year and reflected concerns about the credit quality projection for real activity were skewed to the downside
outlook. Delinquency rates on CMBS and small busi- and that the risks to the inflation projection were skewed
ness loans continued to decline, and the credit quality of to the upside. The staff judged that the ongoing war in
municipal securities remained strong. Ukraine remained a possible source of even greater up-
ward pressure on energy and commodity prices, while
Household credit quality remained solid, with the share
the war and adverse developments associated with
of consumers with subprime credit scores still near his-
China’s zero-COVID policy were both perceived as in-
torical lows. In addition, mortgage delinquencies and
creasing the risk that supply chain disruptions and pro-
the share of mortgages in forbearance both continued to
duction constraints would be further exacerbated in the
trend down in recent months. While nonprime auto
United States and abroad.
loan delinquency rates edged down a touch in the first
quarter, credit card delinquency rates for account hold- Participants’ Views on Current Conditions and the
ers with below-prime credit scores inched up from low Economic Outlook
levels. The sizable increases in credit card purchase vol- In conjunction with this FOMC meeting, participants
umes through March were roughly offset by high levels submitted their projections of the most likely outcomes
of credit card payments, thus increasing household bor- for real GDP growth, the unemployment rate, and infla-
rowing only slightly. tion for each year from 2022 through 2024 and over the
longer run based on their individual assessments of ap-
Staff Economic Outlook
propriate monetary policy, including the path of the fed-
The projection for U.S. economic activity prepared by
eral funds rate. The longer-run projections represented
the staff for the June FOMC meeting implied a trajectory
each participant’s assessment of the rate to which each
for real GDP that was lower than in the May projection.
variable would be expected to converge, over time, un-
The staff continued to project that GDP growth would
der appropriate monetary policy and in the absence of
rebound in the second quarter and remain solid over the
 Minutes of the Meeting of June 14–15, 2022 Page 7
_____________________________________________________________________________________________
 

further shocks to the economy. A Summary of Eco- Participants stressed the need to adjust the stance of pol-
nomic Projections (SEP) was released to the public fol- icy in response to incoming information regarding the
lowing the conclusion of the meeting. evolution of these and other factors.
In their discussion of current economic conditions, par- In their discussion of the household sector, participants
ticipants noted that overall economic activity appeared indicated that consumption spending had remained ro-
to have picked up after edging down in the first quarter. bust, in part reflecting strong balance sheets in the
Job gains had been robust in recent months, and the un- household sector and a tight labor market. Several par-
employment rate had remained low. Inflation remained ticipants noted that household spending patterns ap-
elevated, reflecting supply and demand imbalances re- peared to be shifting away from goods to services. Sev-
lated to the pandemic, higher energy prices, and broader eral participants indicated that some of their contacts re-
price pressures. Participants recognized that the inva- ported that the pace of consumer spending, though
sion of Ukraine by Russia was causing tremendous hu- strong, was beginning to moderate. One reason cited
man and economic hardship for the Ukrainian people. for this moderation was that the purchasing power of
Participants judged that the invasion and related events households was being reduced by higher prices for food,
were creating additional upward pressure on inflation energy, and other essentials. Participants generally ex-
and were weighing on global economic activity. In ad- pected higher mortgage interest rates to contribute to
dition, participants indicated that COVID-related lock- further declines in home sales, and a couple of partici-
downs in China were likely to exacerbate supply chain pants noted that housing activity in their Districts had
disruptions. Against this background, participants stated begun to slow noticeably. Against the backdrop of rising
that they were highly attentive to inflation risks. borrowing costs and higher gasoline and food prices, a
couple of participants commented that consumer senti-
With regard to the economic outlook, participants noted
ment had dropped notably in June, according to the pre-
that recent indicators suggested that real GDP growth
liminary reading in the Michigan survey.
was expanding in the current quarter, with consumption
spending remaining strong. Participants generally With respect to the business sector, participants ob-
judged that growth in business fixed investment ap- served that their contacts generally reported that sales
peared to be slowing, and activity in the housing sector remained strong, although some contacts indicated that
appeared to be softening, in part as a result of a sharp sales had begun to slow and that they had become less
rise in mortgage rates. Correspondingly, participants in- optimistic about the outlook. In many industries, the
dicated that they had revised down their projections of ability of firms to meet demand continued to be limited
real GDP growth for this year, consistent with ongoing by labor shortages and supply chain bottlenecks. Firms
supply chain disruptions and tighter financial conditions. relying on international sources for their inputs were
Participants noted that the imbalance between supply seen as encountering particularly acute supply chain dis-
and demand across a wide range of product markets was ruptions. Supply constraints, labor shortages, and rising
contributing to upward pressure on inflation. They saw input costs were also reportedly limiting energy and ag-
an appropriate firming of monetary policy and associ- ricultural producers’ ability to take advantage of the
ated tighter financial conditions as playing a central role higher prices of their products by investing and expand-
in helping address this imbalance and in supporting the ing their production capacity. Similarly, a few partici-
Federal Reserve’s goals of maximum employment and pants noted that, in other sectors of the economy, their
price stability. An easing of supply bottlenecks, a further contacts reported that they were postponing investment
rise in labor force participation, and the waning effects or construction projects because of rising input and fi-
of pandemic-related fiscal policy support were cited as nancing costs. With supply challenges still widespread,
additional factors that could help reduce the supply– contacts continued to assess that supply constraints
demand imbalances in the economy and therefore lower overall were significant, and many of them judged that
inflation over the next few years. That said, the timing these constraints were likely to persist for some time.
and magnitude of these effects were uncertain. Partici-
Participants noted that the demand for labor continued
pants saw little evidence to date of a substantial improve-
to outstrip available supply across many parts of the
ment in supply constraints, and some of them judged
economy. They observed that various indicators
that the economic effects of these constraints were likely
pointed to a very tight labor market. These indicators
to persist longer than they had previously anticipated.
included an unemployment rate near a 50-year low, job
vacancies at historical highs, and elevated nominal wage
Page 8 Federal Open Market Committee
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growth. Additionally, most business contacts had con- their contacts had reported that low- and moderate-
tinued to report persistent wage pressures as well as dif- income consumers were shifting purchases to lower-cost
ficulties in hiring and retaining workers. However, some goods. Participants also stressed that persistently high
contacts reported that, because of previous wage hikes, inflation would impede the achievement of maximum
hiring and retention had improved and pressure for ad- employment on a sustained basis.
ditional wage increases appeared to be receding.
Participants judged that strong aggregate demand, to-
Employment growth, while moderating somewhat from gether with supply constraints that had been larger and
its pace earlier in the year, had remained robust. Several longer lasting than expected, continued to contribute to
participants observed that labor force participation re- price pressures across a broad array of goods and ser-
mained below its pre-pandemic level because of the un- vices. They noted that the surge in prices of oil and
usually large number of retirements during the pandemic other commodities associated with Russia’s invasion of
and judged that the labor force participation rate was un- Ukraine was boosting gasoline and food prices and put-
likely to move up considerably in the near term. A cou- ting additional upward pressure on inflation. Partici-
ple of participants raised the possibility that tight labor pants commented on the global nature of inflation pres-
markets would spur investment in automation by firms, sures, and a few of them added that many foreign central
boosting labor productivity. banks were also firming the stance of monetary policy.
Several participants judged that a shift in spending from
While labor markets were anticipated to remain tight in
goods to services was likely to be associated with less
the near term, participants expected labor demand and
upward pressure on prices in the goods sector, but also
supply to come into better balance over time, helping to
an intensification of upward pressure on prices in the
ease upward pressure on wages and prices. As in the
services sector. Participants had revised up their PCE
case of product markets, they anticipated that an appro-
inflation projections for 2022 in their June SEP submis-
priate firming of monetary policy would play a central
sions, largely in response to higher-than-expected infla-
role in helping address imbalances in the labor market.
tion readings and the slower anticipated resolution of
With the tightness in labor markets anticipated to dimin-
supply constraints. They expected that the appropriate
ish over time, participants generally expected the unem-
firming of monetary policy and an eventual easing of
ployment rate to increase, as the median projection of
supply and demand imbalances would bring inflation
the unemployment rate in the June SEP showed a grad-
back down to levels roughly consistent with the Com-
ual rise over the next few years, reaching 4.1 percent in
mittee’s longer-run objectives by 2024 and keep longer-
2024. In light of the very high level of job vacancies, a
term inflation expectations well anchored.
number of participants judged that the expected moder-
ation in labor demand relative to supply might primarily Participants observed that some measures of inflation
affect vacancies and have a less significant effect on the expectations had moved up recently, including the staff
unemployment rate. index of common inflation expectations and the expec-
tations of inflation over the next 5 to 10 years provided
Participants noted that inflation remained much too
in the Michigan survey. With respect to market-based
high and observed that it continued to run well above
measures, however, a few participants noted that me-
the Committee’s longer-run 2 percent objective, with to-
dium-term measures of inflation compensation fell over
tal PCE prices having risen 6.3 percent over the
the intermeeting period and longer-term measures were
12 months ending in April. They also observed that the
unchanged. While measures of longer-term inflation ex-
12-month change in the CPI in May came in above ex-
pectations derived from surveys of households, profes-
pectations. Participants were concerned that the May
sional forecasters, and market participants were gener-
CPI release indicated that inflation pressures had yet to
ally judged to be broadly consistent with the Commit-
show signs of abating, and a number of them saw it as
tee’s longer-run 2 percent inflation objective, many par-
solidifying the view that inflation would be more persis-
ticipants raised the concern that longer-run inflation ex-
tent than they had previously anticipated. They com-
pectations could be beginning to drift up to levels incon-
mented on the hardship caused by elevated inflation,
sistent with the 2 percent objective. These participants
with low- and moderate-income households especially
noted that, if inflation expectations were to become
affected. These households had to spend more of their
unanchored, it would be more costly to bring inflation
budgets on essentials such as food, energy, and housing
back down to the Committee’s objective.
and were less able to bear the rapidly rising costs of these
essentials. In that context, some participants noted that
 Minutes of the Meeting of June 14–15, 2022 Page 9
_____________________________________________________________________________________________
 

In their discussion of risks, participants emphasized that the next meeting. Participants concurred that the eco-
they were highly attentive to inflation risks and were nomic outlook warranted moving to a restrictive stance
closely monitoring developments regarding both infla- of policy, and they recognized the possibility that an
tion and inflation expectations. Most agreed that risks even more restrictive stance could be appropriate if ele-
to inflation were skewed to the upside and cited several vated inflation pressures were to persist.
such risks, including those associated with ongoing sup-
Participants noted that, with the federal funds rate ex-
ply bottlenecks and rising energy and commodity prices.
pected to be near or above estimates of its longer-run
Participants judged that uncertainty about economic
level later this year, the Committee would then be well
growth over the next couple of years was elevated. In
positioned to determine the appropriate pace of further
that context, a couple of them noted that GDP and gross
policy firming and the extent to which economic devel-
domestic income had been giving conflicting signals re-
opments warranted policy adjustments. They also re-
cently regarding the pace of economic growth, making it
marked that the pace of rate increases and the extent of
challenging to determine the economy’s underlying mo-
future policy tightening would depend on the incoming
mentum. Most participants assessed that the risks to the
data and the evolving outlook for the economy. Many
outlook for economic growth were skewed to the down-
participants noted that the Committee’s credibility with
side. Downside risks included the possibility that a fur-
regard to bringing inflation back to the 2 percent objec-
ther tightening in financial conditions would have a
tive, together with previous communications, had been
larger negative effect on economic activity than antici-
helpful in shifting market expectations of future policy
pated as well as the possibilities that the Russian invasion
and had already contributed to a notable tightening of
of Ukraine and the COVID-related lockdowns in China
financial conditions that would likely help reduce infla-
would have larger-than-expected effects on economic
tion pressures by restraining aggregate demand. Partici-
growth.
pants recognized that ongoing policy firming would be
In their consideration of the appropriate stance of mon- appropriate if economic conditions evolved as expected.
etary policy, participants concurred that the labor market
At the current juncture, with inflation remaining well
was very tight, inflation was well above the Committee’s
above the Committee’s objective, participants remarked
2 percent inflation objective, and the near-term inflation
that moving to a restrictive stance of policy was required
outlook had deteriorated since the time of the May meet-
to meet the Committee’s legislative mandate to promote
ing. Against this backdrop, almost all participants agreed
maximum employment and price stability. In addition,
that it was appropriate to raise the target range for the
such a stance would be appropriate from a risk manage-
federal funds rate 75 basis points at this meeting. One
ment perspective because it would put the Committee in
participant favored a 50 basis point increase in the target
a better position to implement more restrictive policy if
range at this meeting instead of 75 basis points. All par-
inflation came in higher than expected. Many partici-
ticipants judged that it was appropriate to continue the
pants judged that a significant risk now facing the Com-
process of reducing the size of the Federal Reserve’s bal-
mittee was that elevated inflation could become en-
ance sheet, as described in the Plans for Reducing the
trenched if the public began to question the resolve of
Size of the Federal Reserve’s Balance Sheet that the
the Committee to adjust the stance of policy as war-
Committee issued in May. In light of elevated inflation
ranted. On this matter, participants stressed that appro-
pressures and signs of deterioration in some measures of
priate firming of monetary policy, together with clear
inflation expectations, all participants reaffirmed their
and effective communications, would be essential in re-
strong commitment to returning inflation to the Com-
storing price stability.
mittee’s 2 percent objective. Participants observed that
a return of inflation to the 2 percent objective was nec- Participants remarked that developments associated
essary for creating conditions conducive to a sustainably with Russia’s invasion of Ukraine, the COVID-related
strong labor market over time. lockdowns in China, and other factors restraining supply
conditions would affect the inflation outlook and that it
In discussing potential policy actions at upcoming meet-
would likely take some time for inflation to move down
ings, participants continued to anticipate that ongoing
to the Committee’s 2 percent objective. Participants also
increases in the target range for the federal funds rate
judged that maintaining a strong labor market during the
would be appropriate to achieve the Committee’s objec-
process of bringing inflation down to 2 percent would
tives. In particular, participants judged that an increase
depend on many factors affecting demand and supply.
of 50 or 75 basis points would likely be appropriate at
Participants recognized that policy firming could slow
Page 10 Federal Open Market Committee
_____________________________________________________________________________________________
 

the pace of economic growth for a time, but they saw tions, members also agreed to remove the previous state-
the return of inflation to 2 percent as critical to achieving ment language that had indicated an expectation that ap-
maximum employment on a sustained basis. propriate policy would result in a return of inflation to
2 percent and a strong labor market.
Committee Policy Action
In their discussion of monetary policy for this meeting, Members agreed that, in assessing the appropriate stance
members agreed that overall economic activity appeared of monetary policy, they would continue to monitor the
to have picked up after edging down in the first quarter. implications of incoming information for the economic
Job gains had been robust in recent months, and the un- outlook and that they would be prepared to adjust the
employment rate had remained low. Members also stance of monetary policy as appropriate in the event
agreed that inflation remained elevated, reflecting supply that risks emerged that could impede the attainment of
and demand imbalances related to the pandemic, higher the Committee’s goals. They also concurred that their
energy prices, and broader price pressures. assessments would take into account a wide range of in-
formation, including readings on public health, labor
Members concurred that the invasion of Ukraine by
market conditions, inflation pressures and inflation ex-
Russia was causing tremendous human and economic
pectations, and financial and international develop-
hardship. Members agreed that the invasion and related
ments.
events were creating additional upward pressure on in-
flation and were weighing on global economic activity. At the conclusion of the discussion, the Committee
With the effects of the invasion of Ukraine by Russia voted to authorize and direct the Federal Reserve Bank
already materializing, members considered it appropriate of New York, until instructed otherwise, to execute
to omit from the June statement the sentence conveying transactions in the SOMA in accordance with the fol-
the high uncertainty associated with the implications of lowing domestic policy directive, for release at 2:00 p.m.:
the invasion for the U.S. economy. Members also agreed
“Effective June 16, 2022, the Federal Open
that COVID-related lockdowns in China were likely to
Market Committee directs the Desk to:
exacerbate supply chain disruptions. In light of these
developments, members remarked that they remain  Undertake open market operations as nec-
highly attentive to the upside risks to inflation and would essary to maintain the federal funds rate in
be nimble in responding to incoming data and the evolv- a target range of 1½ to 1¾ percent.
ing outlook.
 Conduct overnight repurchase agreement
In their assessment of the monetary policy stance neces- operations with a minimum bid rate of
sary for achieving the Committee’s maximum-employ- 1.75 percent and with an aggregate opera-
ment and price-stability goals, the Committee decided to tion limit of $500 billion; the aggregate op-
raise the target range for the federal funds rate to 1½ to eration limit can be temporarily increased at
1¾ percent and anticipated that ongoing increases in the the discretion of the Chair.
target range would be appropriate. In addition, mem-
 Conduct overnight reverse repurchase
bers agreed that the Committee would continue reduc-
ing its holdings of Treasury securities and agency debt agreement operations at an offering rate of
and agency MBS, as described in the Plans for Reducing 1.55 percent and with a per-counterparty
the Size of the Federal Reserve’s Balance Sheet that were limit of $160 billion per day; the
issued in May. One member preferred to raise the target per-counterparty limit can be temporarily
range for the federal funds rate 50 basis points to 1¼ to increased at the discretion of the Chair.
1½ percent at this meeting.  Roll over at auction the amount of principal
Members judged that, with high and widespread infla- payments from the Federal Reserve’s hold-
tion pressures and some measures of longer-term infla- ings of Treasury securities maturing in the
tion expectations moving up somewhat, it would be ap- calendar months of June and July that ex-
propriate for the postmeeting statement to note that the ceeds a cap of $30 billion per month. Re-
Committee was strongly committed to returning infla- deem Treasury coupon securities up to this
tion to its 2 percent objective. As the further firming in monthly cap and Treasury bills to the extent
the policy stance would likely result in some slowing in that coupon principal payments are less
economic growth and tempering in labor market condi- than the monthly cap.
 Minutes of the Meeting of June 14–15, 2022 Page 11
_____________________________________________________________________________________________
 

 Reinvest into agency mortgage-backed se- agency mortgage-backed securities, as described

curities (MBS) the amount of principal pay- in the Plans for Reducing the Size of the Federal
ments from the Federal Reserve’s holdings Reserve’s Balance Sheet that were issued in
of agency debt and agency MBS received in May. The Committee is strongly committed to
the calendar months of June and July that returning inflation to its 2 percent objective.
exceeds a cap of $17.5 billion per month. In assessing the appropriate stance of monetary
 Allow modest deviations from stated policy, the Committee will continue to monitor
amounts for reinvestments, if needed for the implications of incoming information for
operational reasons. the economic outlook. The Committee would
be prepared to adjust the stance of monetary
 Engage in dollar roll and coupon swap policy as appropriate if risks emerge that could
transactions as necessary to facilitate settle- impede the attainment of the Committee’s
ment of the Federal Reserve’s agency MBS goals. The Committee’s assessments will take
transactions.” into account a wide range of information, in-
The vote also encompassed approval of the statement cluding readings on public health, labor market
below for release at 2:00 p.m.: conditions, inflation pressures and inflation ex-
pectations, and financial and international de-
“Overall economic activity appears to have velopments.”
picked up after edging down in the first quarter.
Job gains have been robust in recent months, Voting for this action: Jerome H. Powell, John C.
and the unemployment rate has remained low. Williams, Michelle W. Bowman, Lael Brainard, James
Inflation remains elevated, reflecting supply and Bullard, Lisa D. Cook, Patrick Harker, Philip N.
demand imbalances related to the pandemic, Jefferson, Loretta J. Mester, and Christopher J. Waller.
higher energy prices, and broader price pres- Voting against this action: Esther L. George.
sures.
Patrick Harker voted as an alternate member at this
The invasion of Ukraine by Russia is causing meeting.
tremendous human and economic hardship.
The invasion and related events are creating ad- President George dissented because she judged that a
ditional upward pressure on inflation and are large increase in the target range for the federal funds
weighing on global economic activity. In addi- rate would add to uncertainty about policy concurrent
tion, COVID-related lockdowns in China are with the beginning of balance sheet runoff in ways that
likely to exacerbate supply chain disruptions. could unsettle households and businesses and could also
The Committee is highly attentive to inflation adversely affect the ability of small banks to meet the
risks. credit needs of their communities.
The Committee seeks to achieve maximum em- To support the Committee’s decision to raise the target
ployment and inflation at the rate of 2 percent range for the federal funds rate, the Board of Governors
over the longer run. In support of these goals, of the Federal Reserve System voted unanimously to
the Committee decided to raise the target range raise the interest rate paid on reserve balances to
for the federal funds rate to 1½ to 1¾ percent 1.65 percent, effective June 16, 2022. The Board of
and anticipates that ongoing increases in the tar- Governors of the Federal Reserve System voted
get range will be appropriate. In addition, the unanimously to approve a ¾ percentage point increase
Committee will continue reducing its holdings in the primary credit rate to 1.75 percent, effective
of Treasury securities and agency debt and June 16, 2022.5

5 In taking this action, the Board approved a request to estab- Board of such a request. (Secretary’s note: Subsequently,
lish that rate submitted by the Board of Directors of the Fed- other Federal Reserve Banks were informed of the Secretary
eral Reserve Bank of Minneapolis. This vote also encom- of the Board’s approval of their establishment of a primary
passed approval by the Board of Governors of the establish- credit rate of 1.75 percent, effective June 16, 2022, for the
ment of a 1.75 percent primary credit rate by the remaining Federal Reserve Banks of Boston, New York, Philadelphia,
Federal Reserve Banks, effective on the later of June 16, 2022, Cleveland, Richmond, Chicago, St. Louis, Kansas City, and
or the date such Reserve Banks inform the Secretary of the
Page 12 Federal Open Market Committee
_____________________________________________________________________________________________
 

It was agreed that the next meeting of the Committee

would be held on Tuesday–Wednesday, July 26–27,
2022. The meeting adjourned at 10:45 a.m. on June 15,
2022.
Notation Vote
By notation vote completed on May 24, 2022, the Com-
mittee unanimously approved the minutes of the Com-
mittee meeting held on May 3–4, 2022.

_______________________
James A. Clouse
Secretary

Dallas, and effective June 17, 2022, for the Federal Reserve
Banks of Atlanta and San Francisco.)